“Simplified Pricing”

One of the processors switched to “Simplified Pricing” on April 1, 2018 for most of their clients. With this came a change in the format of their statement which was already bad but is now worse. For most merchants it will be difficult to determine the effect of the change on their costs. “Simplified Pricing” is really “Interchange Plus” pricing, you pay the Interchange rate (fee paid to the card issuing bank) plus a flat fee. We prefer this type of pricing but not when it is presented this way.

Most of the customers that were switched were on interchange differential, a system where merchants pay a flat fee plus the difference between the “qualified” interchange rate and the actual rate of the card accepted. Then a “non-qualified” fee is added in. One of our clients just saw their fees increase substantially because of this, they had a rate of 1.51% plus .42% non-qualified fee. Their fees were changed to interchange plus .43%, this means that they will be paying 1.83% for qualified transactions instead of 1.51% (50% on average of all transactions) and .06% less for non-qualified transactions. Not a good trade.

You should know that merchants have 90 days from the time you are able to determine the result of pricing changes to cancel without penalty as per the code of conduct. This client received notice in January that they were being changed to this type of pricing but rates were not quoted nor how the fees would be calculated. That would mean they have until the end of July to cancel without penalty as they could not determine the effect until they received the April statement in May.

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